Rental growth slows in South Africa: arrears plummet to historic lows

South African residential rental growth slowed to 5.0% year on year in the second quarter of this year (Q2 2025) following a strong start to the year. 

According to the latest PayProp Rental Index, average rent increased to R9 218, up R433 from the same quarter last year, with growth remaining well above inflation. This kept landlords in positive territory in real terms.

“Rental growth above inflation and arrears at record lows are strong signals that the market remains healthy,” says André van Rooyen, head of sales, SA at PayProp. “Even with signs of cooling, landlords and agents can be confident that tenants are still able to meet their commitments.”

PayProp said the dip in national rental growth in the second quarter of this year was largely driven by slower performance in South Africa’s three largest rental markets.

Gauteng recorded sluggish year-on-year growth of just 2.4%, while KwaZulu-Natal grew at 3.6%. Growth in the Western Cape was still well above average at 7.3%, but even so, this was down from 9.6% in the first quarter.

Together, these provinces’ slowing growth weighed down the national average despite continued strength elsewhere, the company said. 

By contrast, smaller markets continued to post robust growth, with Limpopo leading the country's growth for the third consecutive quarter with an extraordinary 12.5% year-on-year increase, pushing average rents in the province to R9 145.

This was just R127 behind KwaZulu-Natal. If current trends continue, Limpopo could soon overtake KZN and even Gauteng to rank among the three most expensive provinces for tenants, PayProp said. 

The global property tech company says average rents in the Northern Cape also surged past the R10 000 mark for the first time, as the province posted strong 7.3% growth and cemented its place as the second most expensive province after the Western Cape.

Elsewhere, the Eastern Cape extended its recovery with 5.7% growth, while the Free State delivered a healthy 7.7% despite a small quarter-on-quarter dip in rand terms. Mpumalanga remained the weakest market, with growth almost flat at 0.1% year on year.

The province has now experienced rental growth below 1.0% in three of the past four quarters, underscoring ongoing pressure on the local market.

The global property tech company said the question now is where rental growth will go in the third quarter of this year. It said average year-on-year rental growth slowed from 5.2% in April to 4.5% in June, the lowest monthly figure recorded since May last year.

“One of the key drivers of the strong growth we’ve seen over the past year was landlords and agents making up for low or negative growth during the pandemic,” says Van Rooyen. “Now, after four consecutive quarters of real-terms growth, many may feel less urgency to push rents higher.”

According to the Cost of Living (COL) Report released by the Competition Commission last week, over the five-year period, the cost of rent for houses and flats in South Africa increased moderately over the period and remained below overall inflation. 

Despite the slowdown, PayProp said there was positive news on arrears as the share of tenants in arrears fell to 16.9% in the second quarter of this year, the lowest ever recorded in the PayProp Rental Index.

Tenants in arrears now owe 73.7% of their monthly rent, breaking the previous record low set in the third quarter of 2023.

Tenant finances were said to have remained resilient despite rising fuel and electricity costs earlier in the year, aided by low overall inflation. This, coupled with slower rental escalation, reduces the risk that rent levels will become unsustainable.

However, the company said the average rental applicant is now spending more than half of their income (52.1%) on debt repayments, which could affect their financial resilience.

Van Rooyen says that while national growth may ease further in the coming months, record-low arrears point to a rental market on solid ground. “South Africa’s rental sector is showing resilience, with tenants continuing to meet their obligations even as growth patterns shift,” he says.

“For property professionals, the message is clear: use data to adapt to local conditions. In slower markets, that means digging deeper for opportunities, while in faster-growing provinces, robust tenant vetting will be key to coping with demand and sustaining returns,” Van Rooyen says. 

In June, Prosperity Enterprises, a property investment, educational and wealth structuring company, said that as SA entered the midpoint of this year, South Africa’s property market stood at the crossroads of global turbulence and domestic transformation.

It said that for investors, developers, and homeowners alike, the opportunities are significant if they know where to look and how to act.

It said this was because the global economic environment continues to be reshaped by trade tensions, policy uncertainty, and post-pandemic structural shifts. The International Monetary Fund (IMF) had revised global growth expectations down to 2.8% for this year from an earlier forecast of 3.3%. 

South Africa’s GDP growth projection had also been adjusted to just 1.0%, down from 1.5%, largely due to fiscal strain.

Yet, despite these headwinds, the company said SA remains resilient. “Reforms in energy, infrastructure, and finance are laying a stronger foundation for long-term growth. Business confidence is slowly rebuilding, and investor interest-particularly in real assets-is returning.” 

On Monday, Pam Golding Properties announced that it had concluded a record rental transaction in Melrose Arch, securing R80 000 per month for a luxurious two-bedroom apartment. It said this was the highest rental achieved to date in this sought-after precinct in Johannesburg’s northern suburbs.

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